The mid-summer market slump will soon evaporate, according to an uber-bullish swing trader who expects US stocks to set new all-time highs in the coming weeks.
After an expectation-shattering first half of the year, the S&P 500 hit a rough patch in mid-July and pulled back by 4.7%. In a little over a week, the index sank from near 5,670 to under 5,400 as the mega-cap tech stocks that drove the market higher suddenly sold off.
A chorus of chartmasters and market strategists declared that the greatly anticipated shift away from growth stocks was getting underway, though some are rebelling against that new narrative.
Professional trader John Salama, who predicted earlier this year that the S&P 500 will top 6,000 by the end of 2024, said in a recent interview that he’s still confident in his call. In fact, he’s only getting bolder, as he predicted in late July that the index will hit a record high by Labor Day. Investors won’t want to miss that move.
“You have to get involved in stocks; you have to be invested in the US equity market,” Salama told Business Insider. “There’s just no other way around it.”
John Stoltzfus of Oppenheimer Asset Management shares Salama’s views — not just his name. The strategy chief, who’s been in markets for 41 years, is holding onto his year-end S&P 500 target of 5,900 after raising it twice already. This weakness is a buying opportunity, in his view.
“It does not shake our confidence,” Stoltzfus said of the latest selloff in a recent interview. “The market was likely going to experience a haircut.”
AI will aid US stocks again in the next rally
This multi-week pause will act as a much-needed breather for the S&P 500, Salama said.
After testing its 21-day exponential average — a key level of technical support — the trader thinks the index will retrace its losses and get back above 5,650 by early September. From there, US stocks should win over skeptics, attract cash on the sidelines, and keep rallying.
“This market’s been adding 2.5% per month for the past seven months, and I think that continues,” Salama said.
Like many market pundits, Salama believes small caps can lead the market higher through the end of the year. However, the trader isn’t abandoning his bullish view on mega-cap tech stocks.
“The mega caps are still going to have a great, successful, huge year,” Salama said. “But I do think small caps, due to the catch-up trade, will probably have legs in the last several months of the year.”
Stoltzfus agrees that the market’s favorite stocks, including those tied to artificial intelligence, aren’t wildly overvalued, as some bears have argued.
“I’ve seen every boom, bust, and recovery cycle, and this doesn’t look like the tech bubble,” Stoltzfus said. “These big companies are profitable; they are deeply embedded in the lives of consumers and business.”
Another compelling reason to stay invested is that the AI boom will continue to support stocks, regardless of who’s in the White House next January, Salama said.
“AI is going to continue to be a tailwind for the market, no matter who is president,” Salama said. “Bitcoin will continue to run; semiconductors will continue to run. I don’t think it matters. Trump, Shmump; Biden, Shmiden; Harris, Parris — it doesn’t really matter. We’re going to continue to go higher. You might see some near-term volatility, but it’s not going to matter.”
6 stocks with momentum to target now
When Salama last spoke with Business Insider nearly two months ago, he highlighted eight investments tied to technology or cryptocurrency. With two exceptions — Dell Technologies and bitcoin — each enjoyed a double-digit gain since then, though some have since given it back.
Below are six large-cap stocks across sectors and industries that Salama spotlighted since they’ve recently broken out and have strong technical momentum. Each is accompanied by its ticker, market capitalization, sector, industry, and Salama’s thesis.
